We propose to develop a novel, high-resolution magnetoencephalography (MEG) system, called BabySQUTD, for evaluating neurological impairments of preterm and term babies. This is a portable, non-invasive MEG system that can be used next to the bedside of any neonatal care unit without a cumbersome magnetically shielded room. The system will be the size and shape of an examination table with a headrest in the form of a pillow case. Unprecedented spatial resolution and sensitivity will be provided by a closely spaced array (19 x 4-channel modules) of superconducting MEG sensors housed 2 mm below the outer surface of the headrest. There is an increasing need to develop this type of non-invasive tools for monitoring functions of human infants as more and more neurologically impaired infants survive today. During Phase I, we showed, as proposed, that: (1) we can build a 4-channel module with a noise level less than 10 ft/vHz for detection coils with a diameter of 6 mm, (2) we can construct a headrest with a thickness of 1.0-1.5 mm that is safe to use for the BabySQUID (i.e., that holds the vacuum without breakage), and (3) the sensitivity of the BabySQUID should be high enough to clearly detect evoked cortical activity without signal averaging (based on an evoked response study with the existing micro SQUID which is similar to one module of the BabySQUID). During this Phase II, we will construct a prototype BabySQUID and evaluate its performance in a children's hospital at the University of New Mexico. The design of the BabySQUID is optimized based on our experience during Phase I. The evaluation of the prototype will consist of: (1) testing whether it can operate without noise problems in an electromagnetically unshielded clinical setting and (2) obtaining data from healthy and neurologically impaired neonates to assess potentials of the BabySQUTD for basic and clinical research. PROPOSED COMMERCIAL APPLICATION: The BabySQUID to be developed during the commercialization stage (Phase III) is expected to become a new non-invasive neurodiagnostic tool complementing EEG in assessing possible neurological disfunctions and brain development in neonates through its unique capability to detect electrophysiological functions in focal areas of the cortex in real time without signal averaging.